The Luftwaffe was ill-served by its lack of military intelligence about the British defences. The German intelligence services were fractured and plagued by rivalries; their overall performance was "amateurish". By 1940, there were few if any German agents operating in the UK and a handful of bungled attempts to insert spies into the country were foiled.

As a result of intercepted radio transmissions, the Germans began to realise that the RAF fighters were being controlled from ground facilities; in July and August 1939, for example, the airship Graf Zeppelin, which was packed with equipment for listening in on RAF radio and RDF transmissions, flew around the coasts of Britain. Although the Luftwaffe correctly interpreted the purpose of these new ground control procedures, they were incorrectly assessed as being rigid and ineffectual. The existence of a British radar system was well known to the Luftwaffe from intelligence gathered before the war, but the highly developed "Dowding system" linked with fighter control had been a well kept secret.[66] Even when good information existed, such as a November 1939 Abwehr assessment of Fighter Command strengths and capabilities by Abteilung V, it was ignored if it did not match conventional preconceptions.

On 16 July, 1940, Abteilung V, commanded by Oberstleutnant "Beppo" Schmid, produced a report on the RAF and on Britain's defensive capabilities which was adopted by the frontline commanders as a basis for their operational plans. One of the most conspicuous failures of the report was the lack of any information on the RAF's RDF network and control systems. An optimistic and, as it turned out, erroneous conclusion reached was:

D. Supply Situation... At present the British aircraft industry produces about 180 to 300 first line fighters and 140 first line bombers a month. In view of the present conditions relating to production (the appearance of raw material difficulties, the disruption or breakdown of production at factories owing to air attacks, the increased vulnerability to air attack owing to the fundamental reorganization of the aircraft industry now in progress), it is believed that for the time being output will decrease rather than increase.

In the event of an intensification of air warfare it is expected that the present strength of the RAF will fall, and this decline will be aggravated by the continued decrease in production.

Because of this statement, there was a mindset in the ranks of the Luftwaffe that the RAF would run out of frontline fighters. The Luftwaffe believed it was weakening Fighter Command at three times the actual attrition rate.[68] Many times, the leadership believed Fighter Command's strength had collapsed, only to discover that the RAF were able to send up defensive formations at will.

Throughout the battle, the Luftwaffe had to use numerous reconnaissance sorties to make up for the poor intelligence. Reconnaissance aircraft (at first mostly Dornier Do 17s, but increasingly Bf 110s) proved easy prey for British fighters, as it was seldom possible for them to be escorted by Bf 109s. Thus, the Luftwaffe operated "blind" for much of the battle, unsure of its enemy's true strengths, capabilities, and deployments. Many of the Fighter Command airfields were never attacked, while raids against supposed fighter airfields fell instead on bomber or coastal defence stations. The results of bombing and air fighting were consistently exaggerated, due to over-enthusiastic claims and the difficulty of effective confirmation over enemy territory. In the euphoric atmosphere of perceived victory, the Luftwaffe leadership became increasingly disconnected from reality. This lack of leadership and solid intelligence meant the Germans did not adopt any consistent strategy, even when the RAF had its back to the wall. Moreover, there was never a systematic focus on any one type of target (such as airbases, radar stations, or aircraft factories), so the already haphazard effort was further diluted.